Central government administration, Sub-national government administration, Law and justice and public administration; Law and justice and public administration

Cofinancing (US $M)

L/C Number:

L4429

Board Approval (FY)

99

Partners involved

Closing Date

06/30/2002

12/30/2004

Prepared by:

Reviewed by:

Group Manager:

Group:

Roy Gilbert

Christopher D. Gerrard

Alain A. Barbu

OEDSG

2. Project Objectives and Components:

a. Objectives

To improve local governance and efficiency in the provision of public services by strengthening the capacity of: (i) the central government to formulate, implement and monitor decentralization policies and programs, and (ii) municipalities in areas such as municipal planning, financial and human resources management, and the management of health and education services.

b. Components

1) National Institutional Strengthening (appraisal cost - US$1.8 million; actual cost - US$0.5 million), including: (i) implementation of a national municipal information system; (ii) implementation of a municipal budgeting improvement program; (iii) application of a methodology to reduce the claim processing time of social services by municipalities; (iv) dissemination of best practice and lessons of Chile's municipal development experience (partly financed by Chile: Municipal Development Pilot Project - Ln3668); (v) implementing project M&E; (vi) studies of the improvement of the efficiency and fiscal performance of municipalities.

Final project costs were identical to those estimated at appraisal, but there was a reallocation between two components. Only US$0.5 million was spent on National Institutional Strengthening, against the US$1.8 million expected, but apart from US$0.2 million being cancelled through misprocurement, it is not clear how the savings were made. Meantime, more was spent on Municipal Strengthening than intended. The Bank loan was practically fully disbursed, and financed 43% of the total costs, as intended. Since only 28% of the loan had been disbursed by the original closing date of June 30, 2002, the government requested a twelve month extension of loan closing. A second request for loan extension, this time for 18 months, made the 44% of the loan still outstanding available to Chile's 100 poorest municipalities (up from the 25 municipalities that originally had been eligible to participate in the project).

3. Achievement of Relevant Objectives:

Achieved: While the project provided no baseline or indicators to measure changes to local governance and efficiency in service provision, the ICR does provide indirect evidence that such improvements did indeed occur. 3,669 municipal staff were trained in various areas including participation methodologies, strategic planning, IT applications, organizational development and customer service. Evidence points to some, albeit not very significant improvements in municipal finances (the ICR informs, for instance, that only 57% of municipalities that implemented financial strengthening plans, actually improved their finances). As measured by a reduction from 10 to 5 days it takes to issue a driver's license, customer service by participating municipalities has improved. Nine out of ten participating municipalities have effectively incorporated technology into their day-to-day operations. Four out of five municipalities engage in participatory practices, compared with only one out of five before the project. [This evidence would be more convincing if the ICR had presented equivalent data for municipalities that had not been assisted by the project.] Altogether, 125 municipalities benefited from the project (out of Chile's total of 341). All 22 of Chile's municipal associations also benefited. 989 subprojects were implemented.

4. Significant Outcomes/Impacts:

The project succeeded in establishing a permanent municipal strengthening program within SUBDERE, that continues after the closing of the project itself.

The implementation of the SINIM (National Municipal Information System), that incorporates data from all 341 municipalities, far exceeding the coverage expected at appraisal.

As well as providing financial resources, the project brought many municipalities together and encouraged them to continue to work together.

Poor municipalities, in particular, were encouraged to pursue innovative sub-projects through four inter-municipal competitions sponsored by the project (apart from the generic reference to "innovative", the ICR does not describe what exactly the winning subprojects were about).

Performance indicators of the project design were more focused upon the presentation of periodic reports than the upon project outcomes.

Only 270 subprojects were implemented during the 48 months of the project's first phase, compared with 719 subprojects completed during the 18 months of the project's "extension" phase.

6. Ratings:

ICR

OED Review

Reason for Disagreement/Comments

Outcome:

Satisfactory

Satisfactory

Institutional Dev.:

High

Substantial

While central government capacity to manage and oversee decentralization has strengthened, evidence that the project contributed to this greater effectiveness is thin. Evidence of a project ID impact on the municipal side is stronger.

Sustainability:

Highly Likely

Highly Likely

Bank Performance:

Satisfactory

Satisfactory

In spite of a flawed project design that led to little disbursement and an unsatisfactory performance rating at mid-term. Bank agility in following the borrower's lead to restructure the project through two loan extensions precludes an overall Unsatisfactory rating for Bank performance.

Borrower Perf.:

Satisfactory

Satisfactory

Quality of ICR:

Unsatisfactory

7. Lessons of Broad Applicablity:

There are several lessons that can learned from this operation:

Unlike the experience of many other countries, this project experience demonstrated that there is a strong interest for institutional strengthening at the local level, without having to offer 'rewards' such as infrastructure investments. (Is this because Chile's municipalities found themselves at the very early stages of decentralization, when compared with other countries).

Municipal strengthening projects with solid programs of technical assistance are necessary for national decentralization strategies to succeed.

Successful approaches to institutional development should be documented and disseminated through seminars and an easily accessible and regularly updated database. Easily accessible and transparent information systems on municipal performance, such as the SINIM, can help voters effectively monitor the performance of local governments and enhance accountability.

Decentralization strategies through municipal development programs should regard municipal personnel as a highly valuable, yet untapped asset and resource for innovation.

Field visits to municipalities by Bank missions are necessary for the effective supervision of municipal projects.

8. Audit Recommended? Yes

Why?To learn more about the relative performance of the project municipalities compared with municipalities that did not benefit from the operation and to understand better the respective roles of the Bank and the Borrower in turning this project's performance around. It would also provide an opportunity to learn more about the apparent willingness of municipalities in Chile to pursue institutional strengthening without the inducement of funding for infrastructure.

9. Comments on Quality of ICR:

The ICR is rated unsatisfactory overall due to a number of shortcomings. First, the report could have provided more balance in the assessment of project performance, recognizing key shortcomings encountered. On the initially poor project implementation--reflected in just 28 percent of the loan disbursed by the original closing date--a more candid and critical assessment by the ICR might have enabled more effective lesson learning. Second, the ICR provides much data on detailed indicators of municipal performance on a number of variables, but the case for attributing the reported positive results to the project itself would have been made more convincingly if the ICR had also provided comparable data for municipalities that had not been assisted by the operation. Third, the ICR understates the importance of another key shortcoming, namely the declared misprocurement of a key national study following investigation by the Bank's Department of Institutional Integrity (INT) since, according to the ICR, the investigation did not question "the quality of the study". Fourth, the ICR is more than three times the length recommended in the ICR guidelines.